By Emma Ujah, Abuja Bureau Chief

WHEN the Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, met Chairmen and Board members, as well as, Chief Executive Officers of Nigerian banks at the 58th annual Bankers’ Dinner and grand finale of the 60th anniversary of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, on November 24, 2023, he had his mind made up – that Nigerian banks must be recapitalised.

Recapitalisation is the process of infusing funds into banks to enable them to meet the mandatory capital adequacy set by a central bank.  For Nigerian banks, the governor considered their funds too little to play the roles expected of them in one of Africa’s largest economies.  The injection of funds was to strengthen banks’ resilience, solvency, and capacity to support the Nigerian economy. 

The governor argued that banking recapitalisation was necessary to build a more resilient financial system, capable of supporting Nigeria’s goal of a N1 trillion economy and to strengthen banks’ capital bases to absorb economic shocks, enhance lending capacity, and improve financial stability.

The CBN boss said, “Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy.  

“It is not just about the stability of the financial system in the present moment, as we have already established that the current assessment shows stability.

“However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a N1.0 trillion economy in the near future? In my opinion, the answer is “No!” unless we take action. “Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital.”

About four months, after, precisely on April 1, 2024 the CBN issued the circular, directing banks to recapitalize.  The regulator gave a whole two-year period for the exercise.  It set a March 31, 2026 deadline for the exercise to be completed, representing an ample time for all the banks to raise the necessary capital. That strategy was applauded.

Capital Targets

New Capital Requirements were: N500 billion for international commercial banks; N200 billion for national commercial banks; N50 billion for regional commercial banks; N50 billion for national merchant banks; N20 billion for national non-interest banks; and N10 billion for regional non-interest banks.

Success Story

As of the March 31, 2026 deadline, banks had mobilised a total of N4.65 trillion in new capital, strengthening the resilience of the financial system and enhancing its capacity to support the economy, with 33 of the 37 banks meeting the new threshold. 

The programme recorded strong participation from both domestic and international investors, with 72.55% of capital sourced locally and 27.45% from international markets, reflecting sustained confidence in the Nigerian banking sector.

The recapitalisation exercise, which successfully raised N4.65 trillion, has strengthened banks’ resilience to shocks, bolstered lending capacity for economic growth, and improved financial stability. It empowers banks to support a N1 trillion economy, upgrades infrastructure for digital banking, and boosts investor confidence

Commenting on the exercise, an elated Gov. Cardoso said, “Sustainable economic growth is unattainable without a resilient financial system. This recapitalisation ensures Nigerian banks can fund the scale of transactions needed to drive a N1 trillion economy.

“The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks.

The just-concluded recapitalization exercise  marks the most significant banking reform since 2005, modernising regulatory and risk management frameworks. 

Key Benefits: Stronger, More Resilient Banks

Larger capital bases allow banks to absorb shocks, align with Basel III standards, and maintain financial stability and improved risk management, as governance structures are being embedded sector-wide.

With the level of capital now available to the banks, it will enhance their capacity for large-scale financing, especially in sectors such as infrastructure, energy, manufacturing, and technology projects that require long-term, high-value funding. 

For instance, the Abuja-Lagos High Speed Train project muted under the administration of former President Olusegun Obasanjo, can be returned to the table for a consideration for a Public Private Partnership (PPP) financing.  That project which also includes extension to Kano and Port-Harcourt can change the narrative of travels and tourism in the country.

The recapitalised banking sector will better support the renewed industrialisation and export diversification agendas.  The Cotton, Textile and Garment sector has suffered neglect for over four and a half decades due, mainly, to inadequate funding.  This has led to the closure of textile industrial hubs across the country, especially in Kaduna, Kano, Lagos and the Onitsha-Asaba axis.  The consequences for the economy have been grave- loss of jobs among textile workers, capital flight due to the unbridled importation of textiles from across the world, while the poverty level at home continues to rise.

With the recapitalization, Nigerian banks should be able to get down to the drawing board with textile companies and work out modalities that can resuscitate the sector. With a population of over 250 million, if Nigerian banks finance textile companies to clothe the Nigeria people, they will make huge profits.  In addition, Nigerian textiles can be exported to other African countries and of course beyond, which will earn the nation good amounts of foreign exchange.

The steel sector is an industrialization enable that we cannot continue to shy away from. about three and a half years ago, the federal government disclosed that completing the Ajaokuta Steel Company and putting it to operation required about N1.5 billion.  In their current financial position, Nigerian banks can effective fund that complex and allow it benefit the Nigerian economy, under a privatization or PPP arrangement.

Equally, with the current level of liquidity available to the the banks, time has come for them to pay more attention to Small and Medium Enterprises (SMEs), export-oriented firms and the Solid Minerals sector.

Investor Confidence and Market Stability

The participation of foreign investors demonstrates international confidence in Nigeria’s financial reforms and indeed the Nigerian economy. That over 27.45 per cent of the N4.65 trillion was received from offshore showed the confidence of foreigners in the Nigerian banking sector.

 In addition, stronger balance sheets of the banks will enhance credit ratings and reduce systemic risk.  It will also reduce the rate at which Nigerian banks can source funds from foreign finance institutions for on-lending to Nigerian businesses. 

Synergy Between Fiscal and Monetary Policy

Both focal points of Fiscal and Monetary authorities are on the same page on the need for a strong collaboration between the two.  The CBN’s recapitalisation aligns monetary policy with the Federal Government’s fiscal growth plans as a sound banking base bolsters policy transmission, liquidity management, and inflation control.

In this regard, the CBN Governor and the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, have held several strategic meetings in order to close ranks and strengthen Nigeria’s economic fundamentals.

The high-level engagements focused on deepening coordination between monetary and fiscal authorities to sustain macroeconomic stability, strengthen investor confidence, and unlock private sector growth.

The minister reaffirmed that close alignment of fiscal and monetary policies remained critical to consolidating President Bola Tinubu’s reform agenda, contain inflation, raise revenues and ensure effective credit flows to productive sectors of the economy.

At one of such meetings, Mr. Edun said, “CBN is responsible for monetary policy, but it is also a platform in which we all have a role to play. One of the key tools available to tackle inflation is interest rates. When interest rates are high, the cost of financing rises across the board—affecting government on the fiscal side, as well as households and businesses.

“However, as reforms take hold and inflation begins to ease, we can reasonably expect interest rates to decline over time, subject to decisions by the relevant authorities. This is an important dynamic to keep in mind.

“It is also important to recognise that macroeconomic stability cannot be achieved by any single institution. As earlier noted, it requires policy coherence, institutional discipline, and sustained collaboration across monetary, fiscal, and broader economic authorities.

“In this regard, continued efforts to improve foreign exchange market transparency are commendable. Strengthening market integrity and deepening confidence in the policy environment are critical steps. These efforts, combined with close coordination between fiscal and monetary authorities, are helping to reduce uncertainty, support disinflation, and reinforce macroeconomic stability. This momentum must be sustained.”

Mr. Cardoso also consistently emphasized the need for the monetary and fiscal authorities to work together, as they have a common overall goal of a strong, stable economy and prosperous economy.

Long-Term Economic Growth

The recapitalisation is expected to anchor financial inclusion and broaden access to credit nationwide.

No doubt, the Cardoso team knows that the large funds now under the control of banks require better risk management, and tighter oversight.  With that, Nigerian banks are ready to support individuals, businesses, and fast-track the growth of the economy. 

CBN officials cannot go to sleep. It is critical for the banks’ CEOs to recognize the fact that they are managing investors’ money and that the highest level of corporate governance is expected of them.  The money under their control should be allowed to work for the Nigerian people, as a prosperous Nigerian economy is in the interest of all.